Reuters reports how the war with Iran has affected Gulf states’ international investment flows:
The UAE, Saudi, Kuwait, Qatar, Bahrain and Oman had $4 trillion in public overseas assets in 2025, the International Institute of Finance estimates. That treasure chest, which is divided between official reserves and sovereign wealth funds, represents the accumulated oil-fueled surpluses in the six Gulf states’ current accounts, which reached 15.7% of their collective GDP in 2022.
These outflows have probably now peaked. The average Gulf state’s current account surplus could in a pessimistic scenario shrink to just 3.3% of GDP in 2026, the IIF reckons, as the blocked Strait of Hormuz chokes oil exports. At $100 per barrel, a six-month interruption to the 20 million barrels of oil and products that previously passed through the Strait every day – assuming half these flows can be diverted via pipelines – amounts to $183 billion of lost revenue.
Gulf states are also rethinking their spending priorities. Consultant Rystad Energy puts the cost of repairing energy infrastructure in the region at as much as $58 billion. A new pipeline to bypass the Strait and deliver oil to ships in the Indian Ocean might cost $55 billion. Tehran’s attacks on its neighbours mean Saudi, the UAE and Qatar will also spend substantially more on defense.
Conclusion
We expect Gulf State investment outflows to fall by $400 to $500 billion over the next two years, affecting demand for bonds, equities, and gold bullion.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.